Albany, NY - May 12, 2015 - Attorney General Eric T. Schneiderman today announced multi-state settlements with Sprint Corporation (“Sprint”) and Cellco Partnership d/b/a Verizon Wireless (“Verizon”) that include $158 million in payments to resolve charges that the companies engaged in mobile cramming. Mobile cramming is a practice in which cell phone providers place unauthorized third-party charges on consumers’ bills. One common cramming charge is a $9.99-per-month premium text messaging subscription service (also known as PSMS) for horoscopes, trivia, sports scores or other information that consumers often never requested.
The State Attorneys General and federal regulators allege that cramming occurred when Sprint and Verizon placed charges from third parties on consumers’ mobile telephone bills without the consumers’ knowledge or consent. Sprint and Verizon are the third and fourth mobile telephone providers to enter into a nationwide settlement to resolve allegations regarding cramming. Attorney General Schneiderman announced similar settlements with AT&T in October of 2014 ($105 million) and T-Mobile in December of 2014 ($90 million). All four mobile carriers announced that they would cease billing customers for commercial PSMS in the fall of 2013.
“It’s both unfair and illegal to charge consumers for services they did not request, a practice that Sprint and Verizon engaged in over several years,” said Attorney General Schneiderman. “Under today’s settlement, an estimated 2 million New Yorkers will be eligible for refunds and both companies have committed to ending this deceptive business practice.”
Under the terms of the settlements, Sprint will pay $68 million and Verizon will pay $90 million. Of these amounts, Sprint and Verizon are required to provide $50 million and $70 million, respectively, to consumers who were victims of cramming. Sprint and Verizon will each distribute refunds to harmed consumers through redress programs that will be conducted under the supervision of the Consumer Financial Protection Bureau. It is estimated that more than 2 million New Yorkers are entitled to refunds.
Consumers can submit claims under the redress programs by visiting www.SprintRefundPSMS.com and/or www.CFPBSettlementVerizon.com. On those websites, consumers can submit claims, find information about refund eligibility and how to obtain a refund, and request a free account summary that details PSMS purchases on their accounts. Consumers who have questions about the redress programs can visit the program websites or call the settlement administrators at (877) 389-8787 (Sprint) and/or (888) 726-7063 (Verizon).
Sprint will also pay $12 million to the Attorneys General—including $340,301.30 to New York State—and $6 million to the Federal Communications Commission. Verizon will also pay $16 million to the Attorneys General—including $453,900.83 to New York State—and $4 million to the Federal Communications Commission. The national mobile cramming settlements with the four mobile carriers have netted the State of New York a total of $1,882,846.27.
The settlements, like the settlements entered into by AT&T and T-Mobile in late 2014, require Sprint and Verizon to stay out of the commercial PSMS business—the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem. Under each of the four settlements, the carriers, including Sprint and Verizon, must also take a number of steps designed to ensure that they only bill consumers for third-party charges that have been authorized, including the following:
- The carriers must obtain consumers’ express consent before billing consumers for third-party charges, and must ensure that consumers are only charged for services if they have been informed of all material terms and conditions of their payment;
- The carriers must give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges;
- The carriers must inform their customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and must inform consumers of how those third-party charges can be blocked if the consumers do not want to use their phone to pay for third-party products; and
- The carriers must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from the carrier’s own charges, and must include in that same section information about the consumers’ ability to block third-party charges.
Attorney General Schneiderman’s Office partnered with the other 49 State Attorneys General, the District of Columbia, the Consumer Financial Protection Bureau, and the Federal Communications Commission on the case.
The case was handled by Assistant Attorney General Kate Matuschak of the Consumer Frauds and Protection Bureau. The Consumer Frauds and Protection Bureau is led by Bureau Chief Jane Azia. The Consumer Frauds and Protection Bureau is part of the Division of Economic Justice led by Executive Deputy Attorney General for Economic Justice Karla Sanchez.